When tech companies go down, they go down hard.
This isn't just a phenomenon of the dot-bomb. It has been true since the beginning.
Most of the “BUNCH” from the 1950s – Burroughs, Univac, NCR (NYSE:NCR), Control Data, Honeywell (NYSE:HON) – have either merged, gone into other industries or disappeared. The same is true of the “plug-compatible” outfits of the 1960s, like Amdahl, the mini-computer “giants” of the 1970s, like Data General, the “office products” outfits from later that decade, like Wang and Lanier, and all the pre-IBM PC outfits of the early 1980s like Osborne and Cromemco.
The engineering workstation companies like Silicon Graphics? Gone. The big PC software outfits like Borland and Ashton-Tate? Also gone. I won't bother you with the dot-com companies, but you get the point. High tech is a Grand Hotel – companies come, and they go. Nothing ever happens.
Nokia is now going down that same road. When phones were based on Real Time Operating Systems, early in the last decade, Nokia was king of the hill. No one made as much from so-called “feature phones,” because Nokia had all the carriers locked-up, it owned the Symbian OS, and costs were outsourced, under control.
What happened? The iPhone happened. Then Google (NASDAQ:GOOG) Android happened. Apple (NASDAQ:AAPL) defined a new space, a hand-held Internet terminal, and when Nokia didn't respond to that, Google created an open source version of the concept that took Nokia's business away from it.
Critics may bemoan February's decision by Stephen Elop to hitch his wagon to ex-employer Microsoft's star, but it was grab the life preserver or go down.
Elop's hope is that Microsoft will take the market position Google presently has in the market, and maybe get bought for a decent price. For Microsoft to do that it must break Google's relations with Taiwanese OEMs, the people who make what the rest of the channel sells.
Can they make it?
When I was at CompuTex two years ago, there was some wistfulness over Linux, but everyone remained wedded to Windows. A visitor last year would have seen a very different picture. Everyone was showing Android-based tablets and phones.
Why? Because Android gave these OEMs a measure of control they never had before. They could tweak the hardware as well as the software, building their own knowledge base. They could even become brands themselves. The Taiwanese version of Pinocchio.
The height of this newly-competitive attitude came along last year in the form of Linaro. Linaro finally delivered this week, in the form of an ARM-based circuit board that runs both Ubuntu Linux and Google Android.
Linaro threatens not just Apple and Microsoft, but Intel (NASDAQ:INTC) as well, and the entire mobile ecosystem. It's led by competitive chip-makers such as ARM (NASDAQ:ARMH) and Freescale (NYSE:FSL). But imagine Chinese-made Android tablets that under-price the iPad (by a lot) and Android phones that are literally as cheap-as-chips. Imagine being able to buy an Android for the same price, you're not getting a subsidized version from your carrier, only this one could be taken from carrier-to-carrier as you wished, whenever the deals changed.
Phone competition. Chip competition. OS competition. Carrier competition. What could be better? How can it be stopped?
Elop hopes it can be stopped in court. As Florian Mueller of FOSSpatents notes all the big boys in the rest of the technology space are now arrayed in court against Google. They can out-gun it with patents, with copyrights, with trademarks. They, and their patent troll brethren, seek to turn this from a Pinocchio story into one of Gulliver, binding it down with many, many cables, harrying it, forcing it to run for its life out of “their” business.
In that environment, Nokia could be golden. Its Windows phones are a proprietary stack, one Microsoft (and manufacturers) knows is centrally-controlled. If the OEMs can be forced to defend themselves in U.S. courts, they'll run from Android like rats fleeing a sinking ship.
So Nokia hopes.
Nokia is going down to zero.
Disclosure: I am long GOOG.
Additional disclosure: My IRA owns 20 shares of Google.